Florida persons owning intangible property are subject to an intangibles tax. The tax rate has been reduced for 2006 from $1,000 per $1,000,000 of taxable intangible assets (e.g., stocks and bonds) to $500 per $1,000,000 of taxable intangible assets.
The tax is imposed based on assets owned on January 1. Since assets owned before and after that date do not enter into the computation, the tax is essentially avoidable with proper planning. This planning includes:
–transferring intangible assets to a special type of trust before January 1, under which neither the trust nor any beneficiary is subject to intangibles tax (note that while trusts are exempt from the tax, Florida beneficiaries can be taxed on their trust interests depending on the terms of the trust). After January 1 (subject to a reasonable waiting period) assets are typically then returned to the original owner(s);
–converting assets to intangible assets that are not subject to the tax before January 1, such as into Florida municipal bonds and funds owning exclusively such bonds; and
–owning assets in non-Florida limited partnerships that are not managed or controlled in Florida.
A single individual is not taxed on the first $250,000 of his or her taxable intangible assets, and a married couple has a $500,000 exclusion.
The end of the year comes upon us quicker than you would expect. For those who need year end planning, now is the time to get started.